When you’re taking out a new mortgage, the interest rate you’re offered is important. It will affect the size of your monthly repayments and the total cost of borrowing. Find out which factors could affect the rate you’re offered. 

1. The Bank of England’s base rate

One of the key factors that’s outside of your control is the Bank of England’s (BoE) base interest rate.

There are many reasons why the BoE may change the base rate, but the primary one is to manage inflation, which the Bank aims to keep at 2%. If inflation is high, the Bank may raise the interest rate to encourage businesses and consumers to spend less. In contrast, if inflation falls, the Bank might decrease the base rate to make it cheaper to borrow money. 

As of April 2026, the BoE base rate is 3.75%.

While there’s nothing you can do to change the base rate, it may be important to be aware of it and how it might change. If you choose to take out a variable- or tracker-rate mortgage, changes to the base rate during the term may affect your repayments. 

2. The lender’s interest rate

Similar to the BoE base rate, your lender’s rate might affect the interest rate you’re offered when searching for a mortgage.

Again, you can’t change a lender’s interest rate. However, you can compare different options – you might find that a different lender offers you a more competitive interest rate. A mortgage adviser could help you find a lender that suits your needs. 

3. Your financial stability

When assessing your application, lenders will consider how financially stable you are. For example, they might review your income and how long you’ve held your current job.

As a general rule, the more financially stable you are, the less risk you pose and the better the interest rate you’ll be offered. 

4. Your credit report

Your credit score and report help lenders to evaluate risk when reviewing your application to borrow money, including through a mortgage. 

Your credit report contains information like your repayment history, total debt, available credit, and whether you’ve faced a County Court Judgment (CCJ) or bankruptcy in the past. A poor credit report doesn’t necessarily mean you can’t access a mortgage, but you may pay a higher interest rate to offset some of the perceived risk to the lender.

You can view your own credit report for free, and it doesn’t affect your score. Doing so before you apply for a mortgage could be valuable – you might identify potential red flags that you’re able to improve. For example, if your credit card utilisation is high, you could make additional repayments. Similarly, if you have negative factors on your report that will soon be removed, you may benefit from delaying your application. 

5. The length of the mortgage

When taking out a mortgage, you can usually choose how long you’ll repay it over. This is known as the term.

Traditionally, first-time buyers have taken out a mortgage over 25 years. However, it’s now common to find mortgages with terms of 20 or 40 years.

A longer mortgage term will likely mean your repayments are lower and more affordable. As a result, the term you choose may affect the interest rate you’re offered. Keep in mind that if you choose a longer term, the total amount of interest you’ll pay could be significantly higher. 

6. The loan-to-value ratio

The loan-to-value (LTV) ratio refers to how much you’ve borrowed compared to the property’s value. So, if you’re a first-time buyer with a 20% deposit, your LTV would be 80%. As you make repayments or the value of your home rises, the LTV will fall.

Homeowners with a lower LTV pose less risk to lenders. As a result, the interest rate you pay is likely to fall if the LTV is lower. In some cases, even a small increase in your deposit could move you into a lower LTV bracket and help you secure a more competitive interest rate. 

7. The property

Finally, the property you want to purchase using the money you’ll borrow could affect the terms you’re offered. For instance, if you choose an unusual property, it may be viewed as a greater risk, so the interest rate might be higher. 

Contact us

If you’d like help searching for a mortgage or have questions about how to find a competitive deal, please get in touch. 

Please note:

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.